The statements below are for two firms in the same line of business (in millions of dollars).

a. Analyze the risk drivers in these income statements, Which firm looks more risky for stockholders? Why?
b. On the basis of the relationships in these income statements, develop pro forma income statements under the following scenarios:
(l) Sales drop to $532 million for both firms.
(2) Sales increase to $2,140 million for both firms. What does this analysis tellyou?

FIRM A Soles Expenses 1,073 536 121 214 84 Labor and materials Administration epredation Seling expenses 118 Interest expense Income belce taxes 93 Income taxes Incorne after taxs FIRM B Sales $1,129 Expenses Labor and materials Administration Depreciatiorn Seling experses 793 42 79 1,005 124 biterest expense 120 43 S 77 Income betore taxes Irxcome taxes Income after taxes